SCHEDULE 13D: Fairmount Funds Management Discloses Significant 19.99% Stake in Newly Merged Jade Biosciences, Inc.

Fairmount Funds Management LLC and its affiliates have disclosed a 19.99% beneficial ownership stake in Jade Biosciences, Inc. following a recent merger and corporate restructuring.

Summary

• Fairmount Funds Management LLC, along with Fairmount Healthcare Fund II L.P., Fairmount Healthcare Co-Invest IV L.P., Peter Harwin, and Tomas Kiselak (collectively, the "Reporting Persons"), beneficially own an aggregate of 7,249,356 shares of Jade Biosciences, Inc. common stock, representing 19.99% of the outstanding shares as of April 28, 2025.
• The ownership includes 564,551 shares of common stock, 4,028,000 shares issuable upon conversion of Series A Preferred Stock, and 988 shares issuable upon exercise of Pre-Funded Warrants held by Fund II, plus 2,655,817 shares of common stock held by Co-Invest.
• The reported beneficial ownership excludes additional shares of Series A Preferred Stock and Pre-Funded Warrants that would exceed beneficial ownership limitations of 19.99% and 9.99% respectively.
• The aggregate purchase price for the common stock and Pre-Funded Warrants was $76,770,432, and for the Series A Preferred Stock was $2,000, funded by the general working capital of the Reporting Persons.
• The filing details the merger between Aerovate Therapeutics, Inc. (now Jade Biosciences, Inc.) and Pre-Merger Jade Biosciences, Inc., which became effective on October 30, 2024.
• In connection with the merger, Series A Non-Voting Convertible Preferred Stock was issued, convertible into common stock with certain protective provisions for holders.
• A Jade pre-closing financing round raised approximately $300.0 million from new and existing investors.
• The company also completed a redomestication from Delaware to Nevada on April 28, 2025, and entered into lock-up agreements with certain stockholders and a registration rights agreement for resale of securities.

Sentiment

Score: 6

Explanation: The document is a factual disclosure of beneficial ownership and corporate actions (merger, financing, redomestication). While it details significant investment and strategic moves, it does not contain performance metrics or forward-looking financial guidance that would strongly sway sentiment. The large capital raise and institutional backing are positive, but the complexity of ownership limitations and lock-ups introduce some neutrality.

Positives

• Significant investment by Fairmount Funds Management and its affiliates, indicating strong institutional backing for Jade Biosciences.
• The completion of the merger and associated financing provides Jade Biosciences with substantial capital, including approximately $300.0 million from the Jade pre-closing financing.
• The issuance of Series A Preferred Stock with protective provisions offers certain rights to preferred shareholders, potentially stabilizing a significant portion of the capital structure.
• Tomas Kiselak, a managing member of Fairmount, serves on the board of directors, providing direct influence and oversight from a major investor.

Negatives

• The complex structure of beneficial ownership limitations on Series A Preferred Stock and Pre-Funded Warrants may make full conversion or exercise challenging for Fairmount.
• The cancellation of certain Aerovate options for no consideration or cash at a specific price ($2.5269) could be viewed negatively by some former Aerovate option holders.
• The 180-day lock-up agreements for certain stockholders, including the Reporting Persons, restrict immediate liquidity for a significant portion of the company's shares.

Risks

• Beneficial ownership limitations on Series A Preferred Stock (19.99%) and Pre-Funded Warrants (9.99%) restrict the immediate conversion/exercise of all held securities, potentially limiting Fairmount's ability to fully realize its stake or influence.
• The requirement for the Company to file a resale registration statement within 45 calendar days and the prohibition on other registration statements until then could impact future capital raising flexibility or other corporate actions.
• The 180-day lock-up period for significant shareholders, including the Reporting Persons, means a large block of shares will become eligible for sale simultaneously after the lock-up expires, potentially creating downward pressure on the stock price.

Future Outlook

The Reporting Persons currently have no present plans or proposals that would result in major corporate actions, but they may review, reconsider, and change their position or purpose at any time. They may also seek to influence management or the board of directors regarding the company's business and affairs. The company is required to file a resale registration statement with the SEC within 45 calendar days following the closing of the Merger.

Industry Context

This filing reflects a significant capital event and corporate restructuring within the biotechnology or life sciences sector, common for companies seeking to re-align their strategic focus or bring in new assets/technologies through mergers. The substantial investment by Fairmount, a healthcare-focused fund, suggests a strategic interest in Jade Biosciences' future direction post-merger. The use of preferred stock and warrants with beneficial ownership limitations is a common mechanism in such transactions to manage ownership concentration and regulatory compliance.

Comparison to Industry Standards

• The beneficial ownership limitation of 19.99% for Series A Preferred Stock and 9.99% for Pre-Funded Warrants is a standard practice to avoid triggering certain regulatory thresholds (e.g., 20% for equity method accounting or certain control provisions) or to manage potential 'poison pill' triggers.
• The 180-day lock-up period for key shareholders post-merger is a typical industry standard designed to prevent immediate selling pressure and promote market stability after a significant corporate transaction.
• The commitment of approximately $300 million in the pre-closing financing is a substantial amount for a biotech merger, indicating significant investor confidence, though specific comparable deals would require more context on Jade Biosciences' pipeline or market capitalization.
• The redomestication from Delaware to Nevada is a strategic corporate governance move, often undertaken for perceived benefits in corporate law, tax, or shareholder rights, a practice seen across various industries, though less common than initial incorporation in Delaware.

Management Changes

Corporate Governance

Related Party Transactions

• Fairmount Funds Management LLC serves as investment manager for Fund II and Co-Invest, receiving management fees and potential performance fees.
• Peter Harwin and Tomas Kiselak are managing members of Fairmount Funds Management LLC and are also Reporting Persons, beneficially owning shares through their association with Fairmount and its funds.

Stakeholder Impact

• **Shareholders**: The merger and associated financing, along with the significant ownership by Fairmount, could influence future strategic direction and potentially stock performance. The lock-up agreements temporarily restrict liquidity for certain shareholders. The Series A Preferred Stock conversion limitations and protective provisions could impact common shareholders' influence.
• **Employees**: The merger and subsequent restructuring (e.g., name change, redomestication) may have implications for employees of both pre-merger entities, though specific details are not provided. The acceleration of unvested restricted stock units for Aerovate employees is a positive for those holders.
• **Customers/Suppliers**: The document does not directly address impact on customers or suppliers, but a strengthened financial position post-merger could imply greater stability or expanded operations.
• **Creditors**: The capital raise of approximately $300 million strengthens the company's financial position, potentially improving its creditworthiness.

Next Steps

• The Company is required to prepare and file a resale registration statement with the U.S. Securities and Exchange Commission within 45 calendar days following the closing of the Merger.
• The Reporting Persons may, at any time, review, reconsider, and change their position and/or purpose regarding their investment in Jade Biosciences, and may seek to influence management or the board of directors.

Key Dates

Keywords

Jade Biosciences, Fairmount Funds Management, Schedule 13D, Beneficial Ownership, Merger Agreement, Series A Preferred Stock, Pre-Funded Warrants, Corporate Governance, SEC Filing, Investment Management, Healthcare Investment, Redomestication, Lock-up Agreement, Registration Rights